Economy Watch: Retailers See Strong Sales in January

Winter woes did not stop consumers from spending in January; Bernanke reports good news for economic recovery, with one caveat; and ISM's Non-Manufacturing Index shows some industries on the uptick as well.

Retail sales continued their healthy upward trend in January, with 28 major chain stores posting an average 4.7 percent increase compared with January 2010, according to Thomson Reuters on Thursday. It turned out that the various snowpocalypses and icetastrophes around the country haven’t dampened the pent-up demand for consumer goods that consumers are now expressing.

Some retailers turned in surprising results, such as Limited Inc., parent of the Victoria’s Secret and Bath & Body Works brands, which reported a 24 percent spike in same-store sales this January compared with last. Sports chain Zumiez Inc. experienced a 15 percent rise in year-over-year sales, while Costco Wholesale Corp. saw 9 percent growth.

At the other end of the spectrum, clothier American Eagle Outfitters Inc. saw a 6 percent drop in sales compared with January 2010; Abercrombie & Fitch Co. reported a 4 percent drop; and Hot Topic experienced a 3.3 percent drop.

As it happens, this is the last monthly sales report for American Eagle, Abercrombie & Fitch and Aeropostale Inc., which will no longer release the information going forward. The companies didn’t offer a reason, but it has been the case that quite a few retailers have stopped reporting monthly sales since Wal-Mart did so in 2009, citing volatility in stock prices that follow sometimes volatile monthly sales figures.

Bernanke bullish on economy, except for that pesky unemployment

On the eve of the next set of unemployment numbers from the government, Federal Reserve Chairman Ben Bernanke asserted that the economy is recovering, except for the unemployment situation. That too will improve, he said–but slowly.

Speaking at the National Press Club on Thursday, Bernanke said that “recently… we have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold. Improving household and business confidence, accommodative monetary policy, and more-supportive financial conditions, including an apparent increase in the willingness of banks to make loans, seems likely to lead to a more rapid pace of economic recovery in 2011 than we saw last year.”

Optimistic indeed, but for one thing. “Even so, with output growth likely to be moderate for a while and with employers reportedly still reluctant to add to their payrolls, it will be several years before the unemployment rate has returned to a more normal level,” the chairman continued. “Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.” Hinting at QE3, Mr. Chairman?

ISM Non-Manufacturing Index rises

The Institute for Supply Management said on Thursday that its Non-Manufacturing Index (NMI) tallied 59.4 percent in January, 2.3 percentage points higher than the seasonally adjusted 57.1 percent reported in December. According to the index, more than 50 means growth.

Some 13 industries, all components of the index, reported growth in January, notes ISM. They included some expected industrials, such as retail–see above–and health care, but also real estate and construction. Less surprisingly, such industries such as educational services and public administration contracted in January, victim of state and municipal revenue crunches.

Wall Street dropped in the morning on Thursday, but bounced back into the black, with the Dow Jones Industrial Average ending up 20.29 points, or 0.17 percent. The S&P 500 gained 0.24 percent, and the Nasdaq advanced 0.16 percent.